US economy grows 3% in third quarter despite twin hurricanes | Financial Times

US economy grows 3% in third quarter despite twin hurricanes

The rebuilding effort in Port Aransas, Texas. The commerce department said the storms probably suppressed business activity in areas inc...


The rebuilding effort in Port Aransas, Texas. The commerce department said the storms probably suppressed business activity in areas including oil and gas extraction. Photograph: Eric Gay/AP

The US economy shook off the impact of two major hurricanes in the third quarter growing at a robust 3%, the commerce department reported Friday.
Steady spending from consumers and businesses over the quarter helped the economy to beat economic forecasts of 2.5% annual growth and came despite a dramatic slump in hiring in the wake of hurricanes Irma and Harvey.
The two hurricanes caused massive damage in Texas and Florida during August and September and were cited by the labor department as a major factor in the US economy losing 33,000 jobs in September, the first time in seven years that the economy had recorded a monthly fall in employment.
Houston’s metropolitan area, which bore the brunt of hurricane Harvey, is the country’s s fifth largest, and accounts for 3% of national economic output.
The impact of the storms on gross domestic product (GDP), the broadest measure of economic health, is still being weighed. But the bad jobs report was regarded as a storm-related anomaly by most economists and the stock markets have continued to hit record highs.
The commerce department said the storms probably suppressed business activity in areas including oil and gas extraction in Texas and agriculture production in Florida but added “it is not possible to estimate the overall impact of Hurricanes Harvey and Irma on 2017 third-quarter GDP”.
Consumer spending, which accounts for about 70% of US GDP, gew at 2.4% over the quarter, below recent reports, and may have been suppressed by the storms. But businesses continued to spend robustly with nonresidential fixed investment growing at a 3.9% rate in the third quarter. Exports were weaker and grew at a 2.3% pace while government spending fell at a 0.1% rate.
“The 3.0% annualised gain in third-quarter GDP, which was almost unchanged from the 3.1% increase in the second, will be welcomed by the White House and demonstrates that the hurricanes ended up having little lasting impact on the economy,” Capital Economics said in a note.
While some economists argue that maintaining 3% growth may be difficult given the US’s aging workforce and slowing productivity, the figures are likely to add to the Federal Reserve’s determination to increase rates at its next meeting in December and come as the Trump administration is pushing through a radical overhaul of the tax system which it argues will further spur growth. That assumption has been challenged by Democrats and many economists.
Wade Green - Financial Analyst
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Financial Times: US economy grows 3% in third quarter despite twin hurricanes
US economy grows 3% in third quarter despite twin hurricanes
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